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Trade: Protectionism (trump) Vs. Free Trade (thomas Friedman, Milton Friedman)

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Trade: Protectionism (Trump) vs. Free Trade (Thomas Friedman, Milton Friedman)

        

Protectionism is when countries protect its markets from foreign companies. Our current president, Donald J. Trump, believes that the United States of America should follow this belief to benefit our economy. Trump believes that we need to protect ourselves from foreign companies to grow our GDP and keep jobs at home. Protectionism is implemented by setting up tariffs, quotas, and nontariff barriers. Nations utilize legal barriers, exchange barriers, and psychological barriers to restrain entry of unwanted goods.  With protectionism, businesses work together to establish private market barriers while the market structure itself may provide formidable barriers to imported goods.

Those with strong beliefs toward protectionism believe that protectionism protects the home market. They believe that protecting the home market is extremely beneficial to our nation’s economy. It is said that reducing our imported goods allows us to keep factories and jobs here at home. Keeping these jobs at home allows for the reduction of unemployment and gives American workers the opportunity for a higher standard of living and real wages. For so long we have been relying on imported goods because going overseas to create them has been a lot cheaper. If we can create our own goods, we will not have to rely on other countries to get the goods and supplies we need. Creating our own goods and reducing trade not only makes our economy stronger, but we can use our goods for retaliation and bargaining purposes if needed as well.

Protectionism does have it’s downsides. With protectionism, there are high tariffs to discourage foreign markets to enter our economy. Ultimately, consumers bear the cost of tariffs and other protective measures that come with protectionism. Another downside of protectionism is that with a decrease in imported goods, we lose the sharing of cultures and ideas that comes with it. Also, protectionism does not make for good foreign policy. Placing high tariffs on our imported goods hurts the economy of these outside countries. Once these outside countries feel the negative impacts of our strong trade policy, they can and will retaliate. Soon enough, the United States could be in tense waters with trade wars looming on the horizon.

On the opposite side of the spectrum, there is free trade. This is something Thomas and Milton Friedman believed in. Free trade is when international trade is left to its natural course. There is no government involvement regarding tariffs, quotas, or other restrictions. This economic policy is often referred to as laissez faire trade. Meaning, the government uses a hands off approach when dealing with imports and exports from other countries.

Milton Friedman believed that protectionism impeded economic growth. Free trade allows us to have all of the goods and services we need to survive. With free trade, we are given the opportunity to have a vast amount of goods from a variety of different countries. In doing so, we can have the best technologies, medicines, cars, foods, etc. In today’s world, a single iPhone gets parts from a variety of countries before it makes its way to the United States of America. Thomas Friedman believes that with free trade, we can outsource low skilled and low paying jobs to foreign countries. Thomas Friedman believes that due to this outsource, those displaced will be able to have better paying, higher skilled jobs here at home.  this allows for better jobs here at home.  

With an economic policy of free trade, there are also downsides. For one, free trade leads to increased environmental concerns. With free trade there are little regulations needed to be followed. The home country could have low environmental standards, and with a laissez faire government, there is no way to regulate these imports. On the same note, working conditions could slip as well. With higher regulations and government involvement, our leaders have the power to stop unfair working conditions by saying no to imports from such countries and companies. While Thomas Friedman believed that free trade would lead to better jobs for our country, it is inevitable that job loss will result. A developing country can get away with paying their workers much less. In the United States, with higher minimum wages, and a higher standard of living, factories in the United States can’t compete. This results in many factories outsourcing their jobs overseas leaving the American worker out of a job.

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